Final answer:
An auditor may issue an adverse opinion for a significant, material GAAP violation or a disclaimer of opinion if unable to obtain sufficient evidence due to the client's refusal to correct it.
Step-by-step explanation:
When an auditor discovers a highly material GAAP violation in the financial statements and the client refuses to correct it, it is not necessarily true that the auditor should issue a disclaimer of opinion. The auditor has a few options based on the gravity of the situation and the professional standards governing their conduct.
For significant noncompliance issues that materially affect the financial statements, an auditor may issue an adverse opinion. This indicates that the financial statements do not present fairly the financial condition or operations of the company. However, if the scope of the audit has been limited because the client refuses to provide sufficient evidence, or if the auditor is unable to form an opinion on the financial statements or specific elements, accounts, or items of the financial statements, then the auditor might issue a disclaimer of opinion.
To summarize, if the violation is material and pervasive such that the auditor cannot obtain sufficient appropriate audit evidence, a disclaimer of opinion may indeed be the appropriate response.